Frontier Markets
Should we be adjusting our allocations to emerging or frontier markets?
How do market reclassifications affect share prices?
In Bangladesh, analysts contend with interest ranges instead of interest rates because of a well-intentioned savings program gone wrong. Sloane Ortel and Asif Khan, CFA, take a look at what's happened and what can change.
Like their emerging market forebears, frontier markets present unique and profitable opportunities for those willing to do the hard work. A veteran of the emerging market and frontier market spaces, author Marko Dimitrijević, CFA, attempts to close the gap between misperception and reality regarding this part of the investment world. Not merely a primer on these markets, Frontier Investor offers a basic, succinct grounding in emerging market and frontier market attributes and the intellectual toolkit with which to approach them. Both experienced and novice investors will find the book’s reflections and guidance at once entertaining and useful.
Labels like "emerging" and "frontier" market are not sociological in the least. Applied by the FTSE and MSCI on behalf of global investors, they concern only the investability of a market. But how can we break down such broad terms? To find out, we polled readers of CFA Institute Financial NewsBrief to see what they thought most distinguishes an emerging from a frontier market.
Tendai Musikavanhu, CFA, shares his views on the obstacles to investing in Africa, such as insufficient information, illiquid markets, limited investor protection, and poor perception. He also explains why he think passive investing is better than active investing in Africa.
Africa has 15% of the world's population but controls less than 3% of global GDP. A trio of investment pros make the case that as Africa catches up opportunities will abound for investors.
Mutual funds that invest in emerging markets have reportedly seen more than $2 billion in outflows so far in 2013, while funds focused on frontier markets have seen assets under management swell by more than $1.5 billion in the year to date. What explains this divergence in fortunes? The answer seems to be related to the comparative degree of integration in the global economy and appetite for foreign capital.
Today only $4 billion is invested in frontier markets, says the international economist. Yet Africa enjoys good public finances, strong growth prospects, and favorable productivity and demographic trends.
David Larrabee, CFA, rounds up the most interesting reads for equity investors from the last couple weeks.